To that end, the U.S. Treasury Department is now considering Benchmark Capital’s recent investment in Chinese artificial intelligence startup Manus AI. The scrutiny arises amid growing concerns about compliance with new restrictions on investments in Chinese companies imposed earlier in 2023.
Manus AI, now valued at $500 million, recently closed a $75 million funding round. The participation of Benchmark Capital, which led this funding round, has made this round a headline-grabbing one because of its implications for U.S.-China investment relations. Attorneys for Benchmark have assured that the investment follows federal guidelines. They were keen to stress that Manus AI wasn’t developing its own AI models, but rather serving as a “wrapper” around others that existed. This structure is often used by Chinese firms to tap into foreign capital markets while circumventing capital controls.
Manus AI is itself incorporated in the Cayman Islands. This arrangement is similar to a model employed by global market makers such as Alibaba to lure foreign direct investment expansion. This strategy gives industries the ability to maximize existing safer technologies. They’re able to do this without having to create proprietary models of their own, as that gives them a more favorable position in international investment treaty rules.
For its part, the Treasury Department’s review is looking at Benchmark’s connections to Manus AI. It measures whether the investment is consistent with new and emerging rules aimed at limiting U.S. financial involvement with certain Chinese firms. That oversight mirrors growing fears regarding national security and technology transfer between the two countries.
Delian Asparouhov, a partner at Founders Fund, has publicly expressed fierce condemnation of Benchmark’s investment in Manus AI. He is clear that these financial engagements are not necessarily positive and could lead to real risk. Manus AI is one of the most interesting AI agent startups in the market right now. Its meteoric ascent and well-oiled capitalization machine have the potential to shape future investments in the nascent tech sector.
None of these three organizations—including Benchmark Capital, Manus AI and the U.S. Treasury Department—responded to repeated requests for comment. Their spokespeople declined to comment on the status of the internal review or specifics of the investment deal structure.
As more details emerge, this investment will undoubtedly make waves, but it is poised to have huge implications for the tech industry. It will also be a litmus test for all future U.S. investments in Chinese startups. Stakeholders on all sides are watching intently for on-the-ground development of regulatory frameworks as geopolitical tensions continue to heat up.